Institutional Investors Engage Mining Companies on Carbon Asset Risk

In the run-up to the Paris climate treaty talks, a network of 270 institutional investors managing over $21 trillion in assets has published a carbon asset risk guide for the mining industry. Concerned about the risk of stranded mining company assets, such as coal mines, the guide is meant to constructively engage mining executives and assure they are working to reduce carbon asset risk exposure, reducing greenhouse gas emissions and finding sustainable alternatives.

In less than two weeks, delegates from more than 190 nations party to the United Nations Framework Convention on Climate Change (UNFCC) will meet in Paris for the final stage of what's anticipated will result in a strong, binding global greenhouse gas emissions (GHG) reduction treaty.

Announcements regarding the latest climate action pledges, research, and climate mitigation and adaptation initiatives have been coming hard and fast in the run-up to the 2015 UN Conference on Climate Change (COP 21).

Global Investor Coalition on Climate Change members

On November 17, the Global Investor Coalition on Climate Change (GICCC) -- a global network of 270 institutional investors responsible for managing over $21.29 billion in assets -- released a carbon asset risk management guide for mining companies.

Addressing mining companies' carbon asset risk

Coal mine in Wyoming

Publication of ¨Investor Expectations of Mining Companies – Drilling Deeper into Carbon Asset Risk¨ is an investor-led effort to constructively engage mining executives and assist them in taking steps to reduce the risk of stranded assets in light of the anticipated global climate treaty and stricter regulations at national and sub-national levels.

“Investors recognize that the global economy is now pivoting around the need to limit global warming to two degrees. Diversified mining companies have already begun to shift away from carbon intensive thermal coal and look at the potential for new technologies to achieve net zero carbon operations,¨ Emma Herd who leads the Institutional Investors Group on Climate Change in Australia and New Zealand, said in a statement.

¨The publication of this guide is an important example of the market working to respond to climate change by driving thorough scenario testing, risk analysis and transparency from mining companies,¨ she continued.

The socioeconomic impacts of climate change have become more apparent in recent years and over the course of the past decade. Social scientists are increasingly interested in, and able to zoom in on, the issue both within their disciplines and by participating in multidisciplinary climate change monitoring and research projects.

The initial impacts of what's been deemed the strongest El Niño in 100 years, the flood of migrants seeking refuge in Europe from war-torn Syria and Iraq, and ISIL's terrorist attack in Paris are drawing more attention to the multi-faceted interrelationships between climate warming, forced migration, national security, and economic growth and development.

Zooming in on the socioeconomic risks of rising GHG emissions

GICCC Goal 3

Among the climate risks associated with natural resource exploitation, fossil-fuel divestment and phasing out of government fossil-fuel subsidies are prominent among proposed solutions. The climate and carbon risks associated with mining figures just as significantly among the panoply of risks to investors, as well as the broader socioeconomic impacts, of greenhouse gas emissions, climate warming and prospects for business leaders and organizations to address them. OECD nations, including the U.S., for instance, are considering cutting subsidies to the coal sector, IIGCC points out.

“As momentum builds towards an international climate deal in Paris, the global investor community is setting out as clearly as possible the expectations it has for mining companies about action required to curb carbon asset risk,¨ IIGCC chief executive Stephanie Pfeifer stated.

¨The guide has been developed to help investors step up their engagement with the mining sector as part of their ongoing efforts to better manage climate risk across their portfolios.”

Added Stephanie Maier, head of Responsible Investment Strategy and Research at Aviva Investors: “With mining companies featuring in many portfolios, investors need to know that these companies are prepared for the likely changing market dynamics arising from policies and actions to curb climate change and the risks they pose to profits.

“To protect their long-term interests, investors want assurances that the capital allocation decisions made by the boards of major mining companies give clear consideration to climate change, and to the associated energy transition, in ways that will ensure the future sustainability and profitability of the entire sector.”

*Image credits: 1) Global Investor Coalition on Climate Change; 2) Wikipedia; 3) GICCC, ¨Investor Expectations of Mining Companies – Drilling Deeper into Carbon Asset Risk¨

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